# Earnings per share Financial statement data for the years ended December 31 for Dovetail Corporation follow: a. Determine the earnings per share for 20Y3 and 20Y2. b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or unfavorable trend?

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

Chapter
Section

### Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 13, Problem 8PEA
Textbook Problem
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## Earnings per shareFinancial statement data for the years ended December 31 for Dovetail Corporation follow: a. Determine the earnings per share for 20Y3 and 20Y2. b. Does the change in the earnings per share from 20Y2 to 20Y3 indicate a favorable or unfavorable trend?

(a)

To determine

Calculate the earnings per share of Corporation D for the year ended December 31, 20Y3 and 20Y2.

### Explanation of Solution

Earnings per share: Earnings per share represent the amount of income earned per share of outstanding common stock in a period. This ratio is used for analyzing the profitability of company’s stockholders’.

The following formula can be used to calculate earnings per share:

Earnings per shareNet income(loss) – Preferred dividendsAverage number of common shares outstanding

Determine the earnings per share of Corporation D for the year ended December 31, 20Y3 and 20Y2.

Earnings per share forthe year ended 20Y3}Net income – Preferred dividendsAverage number of common shares outstanding=$448,750 –$40,00075,000 shares=$408,75075,000 shares$5

(b)

To determine

Identify whether the change in the earnings per share of Corporation D from 20Y2 to 20Y3 indicates a favorable or unfavorable trend.

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